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The (temporary?) death of online poker.

I was in the middle of playing the $560 Borgata Spring Open Event when word began to filter through the room about the Department of Justice’s unsealed indictment against the owners of Full Tilt, Pokerstars and Absolute Poker. Most were initially skeptical about any impact, but I read the indictment from beginning to end between hands on my blackberry. The gravity of the situation quickly became clear. Things done changed.

The Unlawful Internet Gambling Enforcement Act of 2006 is a disgusting piece of legislation brought to us by the supposed small government party. It is both indicative of the problems inherent in the way dealmaking is done in Congress (it was a last minute attachment to an anti-terrorism bill) and wildly hypocritical (explicit carve outs for wagering on things like horse racing and state lotteries).

Friday’s indictment is the Feds’ first big effort towards enforcing this legislation, and based on the allegations in the indictment—which go beyond running a gambling operation and include things like money laundering and bribery—I forsee complete success. The Southern District of New York does not lose these types of cases. If the defendants stand trial, they will lose. If they settle, an outright ban will be part of the agreement. If they simply hide, their companies will wither and die. The bell has tolled for online poker as we know it. I seriously doubt that Pokerstars, Full Tilt or Absolute will ever do business with US customers again.

The reaction of the poker community in the last 48 hours has been frustrating to witness. “Fuck the government!” would be an apt three-word summary. The anger is understandable but misplaced. Everyone’s late to the party. The problem lies with the UIGEA, which has existed for nearly five years. The only new part is that the FBI is finally, inevitably getting around to enforcing it. What cinches the case is that the charges are not just related to gaming—protecting our right to expect complete transparency in dealings involving our financial institutions is something that most American citizens would objectively support. Placing blame with our government for enforcing its laws is sheer stupidity. The UIGEA is a poisonous fruit; change needs to come at the legislative level.

Friday’s news leaves millions of dollars in limbo. There is a great deal of speculation about whether the funds in the player accounts will ever be returned. I think the answer is yes, although there’s no way to be sure. Playing poker online does not place us (the players) in violation of the UIGEA. Under a strained interpretation, sending or accepting bank wires/checks to or from the online entities may conceivably place us at risk. Even if that were the DOJ’s position and our accounts were accordingly seized, I believe they might still return the funds. It’s ultimately a political decision, and it’s not the players they are seeking to punish here.

The long term outlook for online poker is actually good in my opinion, and this development does nothing to diminish it. In the days before this news broke, incremental progress towards legalized domestic online poker was being made, including the District of Columbia’s decision to legalize, Nevada’s pending decision to do the same and Harry Reid’s failed lame duck bill that would have legalized online poker at the federal level. Unless this indictment leaves a bitter taste in lawmakers’ mouths with respect to poker, the case against Stars, Tilt and Absolute may actually accelerate things. This will flush the dominant offshore companies from the domestic market while brick and mortar casino companies wait in the wings. Conspiracy theorists could have a field day with this. There is an open market and a great deal of money to be made.

I believe online poker at WSOP.com (or Caesars.com or Wynn.com, etc. etc.) is coming, it’s just question of whether it will take six months or six years. With other offshore entities ready to gobble up the Stars/Tilt/Absolute market share, I’d say six months is more likely.

On a personal level, the news brings to an end my long-running charade of trying to engineer a partial transition to the online game. I have never been able to summon the motivation to do this, and for now I will not have to. My local poker, if any, will now be played in NYC clubs.

On a more superficial level, I will no longer feel even the slightest sense of guilt for my traditional boycott of online Sunday MTTs during football season. I will also have no misgivings when I fail to fire up Sunday MTTs on nice summer days, or on days when family activities are planned. I am also free from the small pangs of regret I admittedly experience when a colleague of mine binks something huge online while I am off enjoying my life.

For Janeen, I imagine this is a mixed blessing. She will now have my (almost) undivided attention when I am home, but I will likely be away even more often.

Poker isn’t going anywhere, demand for poker is not declining as far as I can tell. This latest development will have little impact on live poker. I intend to continue earning a living at it.

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4 thoughts on “The (temporary?) death of online poker.”

With the world in turmoil the US is busy stopping On Line Poker and spending millions to prosecute the like of Barry Bonds and Roger Clemens. Both Bonds and Clemens should have been indicted for Ego and Dum rather than perjury.

As we have discussed elsewhere, I agree with most of your conclusions. I am not as optimistic about the future of poker in the US. I think the health of the poker economy in the US will largely depend on the expediency of the passing of regulation and “legalization” of online poker.

Interesting how Steve Wynn immediately cut ties with Pokerstars as soon as the DOJ news hit. I think you are right about land based casino’s getting first to market in the new online poker world, whenever that is. I tend to think it will take longer ~6 months, as the federal government will not make this a priority. State governments need the money desperately, and will probably try to go the localized D.C. type model to get a piece of the money early. I’ve never played online for more than to keep my game fresh for live events. All the best at the WSOP this summer. I’m playing the $2500 8 Game, and the $2500 10 Game. Take one down…be well.